The Fiboncacci extension is very simply an extension of the move, based on a percentage added. The Fibonacci extension is a popular method for identifying mechanical targets or take profit levels. In general, this is the beauty of the whole automated Fibonacci strategy. It gives you:
Mechanical entry levels (the retracement levels, such as .618)
Mechanical stop loss levels (deeper retracement levels such as .786 or the start of the move)
Mechanical take profit levels (the extension levels, such as 1.27)
The Fibonacci extension is calculated by adding a percentage on top of the move, instead of taking a percentage as part of the move. The popular extension levels are 1.272 and 1.618.
It means that we’re multiplying the size of the move by those ratios to get the extension levels. For example, if the move is bullish and is measured between 1.1150 and 1.1200 (50 pips), the 1.272 extension level is located at 1.1214.
You can also watch the full video on the Fibonacci Extensions Strategy here on Youtube.
If you need a refresher on the basic Fibonacci Concepts, read this article here before you continue.
Step 0: Access the Strategy Concept Template [1 Min]
Click the button to load the trading bot directly onto your canvas:
Templates are for educational purposes only.
The template is designed to run on the 1H timeframe.
Your canvas should display these blocks. Check? Let's continue!
Step 1: Export the Trading Bot [1 Min]
Before diving into customization, export the trading bot with the upper right 'DOWNLOAD' button.
Step 2: Upload to MetaTrader 5 [4 Min]
Don’t know how? Refer to our help article How to Run Your Profectus Trading Bot in MetaTrader 5 (MT5).
Step 3: Understand the Logic [10 Min]
For this section, let me walk you through the system for sell trades only. The buy side logic has already been discussed in the previous episode which I have already linked to at the start of article.
Initiate the variables. We start by putting the following variables in the Variables list. All are numbers and have a value of 0 by default:
high
low
highlow
highlowfib1
highlowfib2
highlowfib3
fib1
fib2
fib3
fib4
fibext
impulse
ATRmove
Run per candle. We start the EA by checking all the rules once per candle.
Trade rule for identifying a bullish move. Put a trade rule block with the following rule:
Candle low, Candle ID 5 < Candle low, Candle ID 1
For continuing with the sell side of this strategy, we simply take the false output of this block and connect the next block to this false output.
Assign the move high and low to variables. Use 2 modify variable blocks to assign the high and low to the variables high and low.
high = Candle High, Candle ID 5
low = Candle Low, Candle ID 1
Identify the Impulse using Formula block. We use 2 simple calculations for this:
Impulse = high - low
ATRmove = Indicator Average True Range (period 14) * 5
Calculating the Fibs using 2 formula blocks. Formula block 1:
Highlow = high - low
Highlowfib1 = highlow * 0.382
Highlowfib2 = highlow * 0.618
Highlowfib3 = highlow * 0.786
Highlowfib4 = highlow * 0.27
Confirm bullish move again. We run another check to see if the move was bearish or bullish to identify the next steps. Put a trade rule block with the following rule:
Candle low, Candle ID 5 < Candle low, Candle ID 1
For continuing with the sell side of this strategy, we simply take the false output of this block and connect the next block to this false output.
Assign the Fibonacci Ratios. We use another formula block and connect this to the false output of the previous block. We put the following formulas in:
Fib1 = low + highlowfib1
Fib2 = low + highlowfib2
Fib3 = low + highlowfib3
Fibext = low - highlowfib4
Check if no open trades. Count trades block with 0 orders and 0 open trades
Confirm Impulsive Mzve. Trade rule block checking if:
Impulse > ATRmove
Sell pending order.
Open price: Custom price level, fib2
Stop loss: Custom price level, high
Take Profit: Custom price level, fibext
Expiration: 4 hours
Now that you’ve built this strategy. This is what an example of a sell trade looks like on the chart.
Step 4: Make It Your Own [10 Min]
You can adjust and experiment:
Add more strategy rules or include the Fibonacci Extensions components in your own strategies
EXPORT and see the differences.
Play around with timeframes and assets
EXPORT and see the differences.
Refine the rules to fit your own interpretation of the Fibonacci Extensions concept
EXPORT and see the differences.
Click the button to load the trading bot directly onto your canvas:
Templates are for educational purposes only.
The template is designed to run on the 1H timeframe.
Conclusion
The Fibonacci Extensions strategy is the final of the Fibonacci series. The extensions are great tools for determining take profit targets beyond the more standard ways of setting your targets. It's mechanical and universally applicable across all markets. Now it's your turn—apply the template, tweak the logic, and make it yours. 🚀